Covered Bonds

In the first week of March 2020, the Covid-19 news was already hammering the markets and volatility, as measured by VIX, was almost at levels not seen since 2008. Although the VIX reached 28.57 last week, that figure was only around half the value it was this time last year. With the pandemic still going on Primary Market Monitor takes a look at what has changed in bond execution dynamics since then.

Oldenburgisch Landesbank priced its debut publicly distributed mortgage Pfandbrief on Tuesday, attracting enough demand to ensure the deal size was increased to the top end of the expected range, even as the spread was tightened. But a deterioration in market conditions was blamed for its low subscription ratio.

BPCE attracted good demand for its second dual tranche covered bond of the year, which included a rare 20 year portion. The deal showed that investors are so far impervious to the recent rise in rates.

Crédit Agricole Italia became the first Italian bank to issue a green obbligazioni bancarie garantite on Monday and the first in well over a decade to issue an OBG at a single-digit spread over mid-swaps.

Crédit Agricole Italia has mandated its parent company’s investment banking arm to arrange investor calls ahead of its inaugural green covered bond.

Oldenburgische Landesbank (OLB) is set to issue its first Pfandbrief sometime next week, after mandating leads for a roadshow.

Hypo Tirol issued its first Pfandbrief to fund affordable housing on Thursday.

The European Central Bank managed to buy more covered bonds on a net basis in February than it did January, but the asset class fell as a proportion of its total asset purchases. In the absence of fresh supply, it was forced to source paper in the secondary market, but at a markedly lower pace than before.

SR Boligkreditt issued its largest and longest covered bond on Wednesday, at the tightest spread it has achieved in more than three years, slightly inside fair value.

Hypo Tirol Bank has mandated leads to roadshow its first social covered bond and SR Boligkreditt has mandated leads for a vanilla deal. Both issuers plan on following printing 10 year deals, where yields are almost positive.

Sameer Rehman, director of debt and capital markets at TD Securities in London, is heading back to Toronto after 12 years in the UK to focus on Canadian public sector borrowers.

HVB, the Germany subsidiary of UniCredit, attracted more demand for its €750m 10 year than any Pfandbrief of that size launched in over a decade.